'Nothing is free': Joe Hockey warns of budget pain

Australians from all walks of life should brace for a serious tightening of federal government expenditure, Joe Hockey has warned but it appears it will be older Australians who will be asked to do some of the heaviest lifting in a budget repair task being cast as a moral and economic necessity.

Treasurer Joe Hockey. Picture: ALEX ELLINGHAUSEN

Treasurer Joe Hockey. Picture: ALEX ELLINGHAUSEN

In a speech just weeks ahead of his first budget, Mr Hockey has railed against the unsustainability of the age pension, the growing cost of aged care services, and the drain on the budget from the Pharmaceutical Benefits Scheme, which he noted was weighed down with 80 per cent of its costs coming from concessional usage.

"The problem we have is that the volume of demand for these programmes is outstripping the capacity of taxpayers to fund them," Mr Hockey warned.

"Between 2010 and 2050 the percentage of people of working age supporting those over the age of 65 in Australia will almost halve.

"So the policies must be changed, either now or more dramatically in the future." 

Announcing that the long-withheld Commission of Audit report would finally be released next week, the Treasurer said the budget would draw some recommendations from the report but would either delay or reject others.

He said every sector of the community would be affected including households, corporates, and the public sector.

In an effort to drive the budget back into the black, he said the budget would contain significant across-the-board spending cuts and would also feature wider use of means testing for welfare benefits and the more extensive use of co-payments for services until now free of such user charges.

That appeared to vindicate reports that a new $6 fee for GP visits to be met by the patient could be in the the offing as well as possible payments for hospital services, and other government provided benefits.

Mr Hockey said  the charges would "encourage moderation in demand for services", noting that "nothing is free - someone always pays".

Mr Hockey is expected to outline a slightly faster return to surplus than has previously been foreshadowed with an accompanying graph in his speech showing the government's balance sheet could achieve balance in 2018-19 on a path towards a solid surplus of 1 per cent of GDP by 2023-24.  

The speech, a keynote address in Sydney on Wednesday evening, was designed to frame the public debate ahead of the budget.

Citing what he dubbed "a strong economic and moral imperative to change course," Mr Hockey, said it was only by getting back to surplus that the country could stop borrowing money - which this year alone meant an interest bill of $12 billion or "about the same as we spend on higher education".

Having previously called for an end to the "age of entitlement", Mr Hockey spent some time in his speech focusing on the expanding cost of the age pension, arguing that as the population ages it places an increasing burden on other people.

"Of Australians over the age of 65, four out of five receive a full or part pension," he said.

"If we also take into account the concessionary health card, then only 14 per cent of older Australians receive no government payments.

"Despite spending billions of dollars in taxation benefits for superannuation, by 2050, the ratio of Australians receiving a full or part pension will still be around four out of five.

He said aged care was "now the eighth largest category of spending".

"We spend more on aged care than we do on higher education or child care.

"And the Pharmaceutical Benefits Scheme is the 10th largest category of spending.

"Nearly 80 per cent of the scheme’s expenditure is attributable to concessional recipients."

Mr Hockey revealed the Commission of Audit had recommended that real spending growth be capped at no more than 1.75 per cent if the budget was to have any chance of returning to a long-term goal of achieveing a surplus equal to 1 per cent of GDP.

Labor's spending growth target was a maximum 2 per cent but it never achieved that after the stimulus splurge needed to avoid a GFC-led recession.

The opposition immediately criticised the Hockey speech as an alibi for broken promises.

"The Abbott government created their own budget emergency, and now they are telling pensioners to pay for it," said Opposition Leader Bill Shorten.

"If the Prime Minister is so desperate to cut, he should leave pensioners alone and start with his extravagant paid parental leave scheme.

"The Prime Minister promised ‘no change to pensions’ and he can’t talk his way around that, try as he might."



Discuss "'Nothing is free': Joe Hockey warns of budget pain"

Please note: All comments made or shown here are bound by the Online Discussion Terms & Conditions.